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Sunday Papers

The Sunday Paper – Air Quality and Manufacturing Firm Productivity: Comprehensive Evidence from China

I’ve summarized and posted links to a number of papers in the past year or so on atmospheric pollution in China. The paper highlighted and linked to this week will be the last in this series.

Today’s paper from Shihe Fu, V. Brian Viard and Peng Zhang of the Southwestern University, the Cheung Kong Graduate School of Business and the Hong Kong Polytechnic respectively is a monster in terms of its scale. In it the researchers have attempted a China-wide analysis of how pollution affects productivity.

Studies prior to this have focused on the impact on certain groups of individuals or workers in a particular industry. This is the first such study that aims to capture the effect of pollution on an entire country which, in China’s case, is nearly a continent.

The construction of the analysis combines satellite data from NASA on temperature inversions in the atmosphere (a reliable proxy for pollution) together with on the ground data on county by county output. The study covers all SOEs and firms with sales over Rmb5mn.

The key conclusion (among a number of other interesting observations) is that by lowering the concentration of PM2.5 in the atmosphere by 1% nationwide GDP would rise by 0.06% or by around Rmb9bn.

As the latest 5-year plan has a target of reducing PM2.5 concentrations by 50% such an achievement would have, in addition to all the other obvious benefits, a material impact on nationwide production.

I wrote this is the last piece I’ll be highlighting on this subject; the reason is I now have a much better grasp of the issue. The paper today, combined with others I’ve now gone through (and posted previously), have helped me understand the multi-dimensional level on which atmospheric pollution contributes to bad social and economic outcomes. I knew vaguely pollution was bad, now I know with much greater precision why.

You can access the paper in full via the following link Air Quality and Firm Productivity in China.

Happy Sunday, if you don’t live in China; commiserations if you do.

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